Self Assessment Payments on Account: How They Work and When They Apply

This guidance is for Self Assessment taxpayers who have been told they need to make payments on account and want to understand whether these payments genuinely apply to them.

Payments on account often catch people by surprise, particularly in the first year they apply. If misunderstood or ignored, they can lead to unexpected cash-flow pressure, late payment interest, or penalties. This page explains when payments on account apply and how to recognise whether you fall within the rules. Whether you manage them yourself or through a self assessment payment service in London.

Understanding Payments on Account and Claims to Reduce Them

Self-assessment taxpayers are usually required to pay their income tax liabilities in three instalments each year. The first two payments on account are due on 31 January during the tax year and 31 July following the tax year end date, often arranged through a tax payment service in London where support is needed.

These payments on account are based on 50% each of the previous year’s net income tax liability. In addition, the third (or only) payment of tax will be due on 31 January following the end of the tax year. If you think that your income for the next tax year will be lower than the previous tax year, you can apply to have your payment on account reduced. This can be done using HMRC’s online service or by completing form SA303.

Please note that you do not need to make any payments on account where your net Income Tax liability for the previous tax year is less than £1,000 or if more than 80% of that year’s tax liability has been collected at source.

There are no restrictions on the number of claims to adjust payments on account a taxpayer or agent can make. The payments are based on 50% of your previous year’s net income tax liability. If your liability for 2024-25 is lower than 2023-24 you can ask HMRC to reduce your payment on account. The deadline for making a claim to reduce your payments on account for 2024-25 is 31 January 2026.

If taxable profits have increased there is no requirement to notify HMRC although the final balancing payment will be higher.

What Happens If Payments on Account Are Missed or Misunderstood

If payments on account apply to you and are not paid on time, HMRC will normally charge late payment interest from the due date. Where amounts remain unpaid, penalties may also apply depending on how long the tax is outstanding.

We often see taxpayers assume payments on account are optional or temporary. In reality, once they apply, they form part of your ongoing Self Assessment obligations unless HMRC confirms otherwise.

In Practice – Why Payments on Account Cause Confusion

In practice, we often see confusion where taxpayers believe payments on account are a separate charge or a penalty. Others assume they only apply once. Issues commonly arise in the first year, where the balancing payment and the first two payments on account fall due close together.

For practical guidance, experienced accountants based in Fulham Broadway work with Self Assessment taxpayers across nearby areas such as Walham Green and Sands End, advising on payments on account and forward-looking cash-flow planning. At CIGMA Accounting, our team can help you establish whether payments on account apply in your circumstances and explain what you’re likely to need to plan for in the periods ahead.Find out more about our accounting support in London.

HMRC explains how payments on account work, when they apply, and when they do not, in its official guidance on GOV.UK.

Check Whether Payments on Account Apply to You

Payments on account do not apply to everyone, but when they do, missing them can create problems quickly. A short review now can help confirm whether these rules apply to your situation and what your obligations are.